Mastering Capital Expenditure (CAPEX)

Capital Expenditure (CAPEX)

• CAPEX refers to the funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, equipment, and technology.
• CAPEX is a long-term investment in the company's infrastructure, expected to provide benefits over a period of time.

Operating Expenditure (OPEX)

• OPEX refers to the day-to-day expenses incurred by a company to operate and maintain its business.
• OPEX is a short-term cost, typically expensed in the current period.

Examples of CAPEX

• Purchasing new equipment or machinery
• Building a new factory or office
• Upgrading existing technology infrastructure
• Acquiring a new business or asset

Examples of OPEX

• Salaries and wages of employees
• Rent and utilities for offices and facilities
• Marketing and advertising expenses
• Travel and training expenses

Procurement Approach

• CAPEX typically involves a more formal and structured procurement approach, with a specific budget and approval process.
• OPEX, on the other hand, may involve a more flexible and ongoing procurement approach, with a focus on meeting immediate business needs.
• The procurement approach for CAPEX tends to be more strategic and long-term, while OPEX is often more tactical and short-term.